Non-performing loans reach 8% of portfolios, continue to rise

Non-performing loans – i.e. those rated as “doubtful” and “loss”, are now accounting for 8.44% of the total loans granted by banks to clients, doubling their share of the total in one year. The loan portfolios of local banks therefore look visibly worse than those in Poland and Hungary.
The last three months came with the most spectacular increases, given that non-performing credits’ share of the total was still at around 5% in November. NBR set a complex credit ranking system, depending on the number of days of delay of the instalment payment, on the financial performance of the debtor and on the taking of legal steps against the client. Loans become doubtful if they are over 60 days past due and move to “losses” if they are 90 days past due.
Analysts are pessimistic and say we will probably continue to witness the deterioration of the loan portfolios, given that the economic situation seems gloomier and gloomier, with a painful recession looming ahead.
“NBR had been talking about the increase pace of the non-performing credits for a long time, though levels were not considered alarming. We are now reaching fast some levels that are no longer comfortable. Portfolios will continue to deteriorate, given that unemployment will increase,” says Catalina Constantinescu, senior economist of RBS Romania.
In absolute volume, non-performing credits amount to 16.7 billion RON (3.9 billion euros). NBR allows banks to adjust their exposure to clients with the value of the collateral pledged when the loan was taken. The adjusted exposure relative to the “doubtful” and “loss” loans stood at 8.6 billion RON (2 billion euros). For loans rated as “losses” banks have to set up provisions for the full amount, while in the case of the “doubtful” category, the adjusted exposure has to be covered 50% by provisions.